Jet-Fuel Prices Have Plunged but Aren't Resulting in Much Lower Fares — WSJ

By Alison Sider

Airlines are finally getting some relief at the jet-fuel pump. Fliers may not share in the savings, though.

Jet-fuel prices doubled in the weeks after the Iran war started, and carriers raised fares to keep up. Now fuel prices are down 40% from their peak in April, but analysts say fares aren't likely to follow because travelers keep paying up.

Resilient travel demand and restrained supply — especially with the onetime discount leader Spirit Airlines out of the picture — are bolstering airline executives' confidence.

"I'm actually very bullish that the industry will retain a much higher percent of the fare increases than would be typical historically," Southwest Airlines Chief Executive Bob Jordan said at an investor conference in late May.

"Obviously, you hate to see somebody go out of business, but with Spirit out of business, I think that helps that environment," he said.

Airline shares have been on a tear in recent weeks, trading higher with each downward move in the price of crude oil. Delta Air Lines, the industry's profit leader, and United Airlines both hit record highs in late June. American Airlines' stock rose more than 30% over the past month.

Carriers have cranked up fares eight times since the start of the war, according to Deutsche Bank analysts. In May, the average price of a round-trip domestic ticket sold through a travel agency was $628, up nearly $100 from a year earlier, according to Airlines Reporting Corp., which tracks agency ticket sales.

But executives have said — somewhat to their surprise — bookings haven't slowed.

"I have expected more of an elasticity effect," United Airlines CEO Scott Kirby said in May . "But the demand environment is pretty strong."

The supply of seats in the market has also tightened. Airlines dropped flights that weren't going to make enough money to be worthwhile at higher fuel prices.

Before the Iran war began, U.S. carriers were planning to boost domestic schedules by 4.6% in the third quarter, compared with the same period of 2025, according to schedule data analyzed by trade group Airlines for America. Now they are hardly planning to grow at all.

Spirited away

In the past, such periods usually didn't last long. When fuel prices fell, carriers would eventually start adding flights and routes again to capture more revenue.

But the budget airlines that once spurred the rest of the industry to race to the bottom on ticket prices are trying to stem their own losses. They can no longer afford to expand at the same breakneck pace they once did.

Spirit Airlines, once the most prominent and disruptive of the discounters, shut down in May when the surge in fuel prices helped knock the bankrupt carrier from its already-precarious perch.

"For American, let's face it — we competed with Spirit across the board, " American CEO Robert Isom said in May. While Spirit had shrunk to a fraction of its former size by the time it closed, "we saw across-the-board improvement in all those places that we compete directly," he said.

There are some routes, like Atlanta to Fort Lauderdale and Orlando, where rivals have rushed to fill the gap Spirit left behind, leading to lower fares, according to data provider OAG.

Still, the months of skyrocketing fuel prices will likely dent airlines' profits this year. Carriers are due to report second-quarter results in the coming weeks, starting with Delta on Friday. Initially, airlines were only covering a portion of the run-up through higher fares, but that started to change as fuel prices receded.

"The tickets we're selling today are probably covering the spot price of fuel in their entirety," Alaska Airlines Chief Financial Officer Shane Tackett said in early June.

Playing catch-up

Airline executives have said the increase in fares is long overdue, and travel remains a good deal even at current prices.

Fares didn't rise in price the way other goods did in recent years. The consumer-price index for airfare fell 3.5% from 2019 to 2025, while overall consumer prices rose 26%.

But consumers, weary of paying high prices for just about everything, may not see it that way much longer. Their thinking about travel spending has shifted since the start of the year, with an uptick in the share of Americans saying it is a bad time to spend on vacations, according to a survey conducted by market research firm Future Partners. Some consumers say they are already tightening their belts.

While few were willing to give up a summer trip even if it was a bit more expensive, consumers might start rethinking their plans in the fall, Melius Research analyst Conor Cunningham wrote last week.

"The real test is what happens after Labor Day, when leisure demand tapers and airlines adjust fall capacity for a lower-fuel environment," Cunningham wrote. "If demand moderates even at the margin, or if supply is added back too quickly, the old addiction to fare sales and discounting could return."

Write to Alison Sider at alison.sider@wsj.com